I got many mails and questions on chat that we do not have initial amount of INR 4-5 lacs to invest in real estate and all. Most of the people shared that there investment target is around INR 5,000-15,000 per month what will be the most suitable option them. Lets focus in this article that how can we accumulate that amount by small regular investments.
First thing is that we have to make this a habit of investing small regularly and accumulating our wealth over period. Now there are two ways either you invest only this much including your tax saving investments or it is over and above that because it will affect the liquidity (means how easily money is availble to you as you want)
Lets take an example of Suresh who want to invest INR 10,000 per month but not sure that where to invest which is over and above his Tax saving instruments. He wants to invest to generate suffeceint amount to get his downpayment for his house which is INR 5 lacs. How should he go about it.
Now as we understood that we have various investment options like Equity high return with high risk, Fixed deposits with bank/ Post office low returns with minimual risk, Mutual funds with better returns and moderate risk and Recurring deposits with banks/Post office no risk low returns. Now it is very important to understand that we can not put all money at riskall together because if market remians volatile (means changing up and down frequently) like present we will not be able to take maximum benefit untill we put moretime and effort and trade on a daily basis with prior knowledge of investments in shares.
As discussed with Suresh we understood that he can identify the good shares to buy on basis of fundamentals for long term but not for short term, So the best way to go about it to split his investments in two parts INR 4,000 and INR 6,000. Investment of INR 4,000 should be invested as Recurring deposits with Bank to receive the assured 8% interest per annum. The accumulation of this investment will be as follows.
So without any risk in 5 yrs time you will get almost INR 3 lacs and in 10 years time you will receive almost INR 7.5 lacs with this small Investment. This is the art of investing small and grow wealthy over the period of time.
Now what to do with remaining INR 6,000 since our investment time frame is smaller so we should go for limted exposure to equity market, which can be acheived with balanced funds. Balanced funds are those mutual funds which invest the money in equity market and as well as the corporate debt/ Government bonds market. There are more than 100 such schemes are available with all fund houses to if we see this years best performing funds in the below given table, we can easily see for a term of 5 yrs almost all of the funds have given more than 15% retunr on annual basis.
Therefore we can safely assume a return of 12% on our investments in balanced fund, which will translate to following amount at the end of each year.
So at the end of 5yrs you will receiv almost INR 5 lacs and at the end of 10 years you will get almost INR 14 lacs. In total this way if Suresh keep on investing INR 10,000 regularly then at the end of 5 yrs he will receive INR 7.75 Lacs and in the end of 10 yrs he will get INR 21.5 Lacs to fund his real estate need.
Do remember this is over and above your investments for Tax saving which is for relatively longer term of 10-15 yrs. This kind of an investment is liquid and can be used for any kind of funding required in a small time frame like 5-10 yrs. So Suresh can use this money to buy house and for down payment for his own car. Now if you have some more questions and queries do not forget to write them on firstname.lastname@example.org.